Holiday bargains fade in the new year.
So will the spurt in dealmaking that capped the deadest year in two decades for bank mergers, experts say.
The 16 deals in December (up from 10 in November) brought the full-year total for banks mergers excluding failures to 173 —
Experts credit the late-year pickup to decisions by boards at a handful of struggling banks to get their affairs in order before Jan. 1. They doubt the momentum will last as the troubled economy weighs on bank profits —
"It is a little interesting to see this flurry of deals right at the end of the year," says Jacob Thompson, managing director with Samco Capital Markets Inc., an investment bank in Dallas that advises community banks. "But I don't know necessarily that that's going to translate into more activity."
He credits December's volume to "the psychological factor" of boards determining that "we've got to get it announced before the end of the year" so that a stressful sales process "is not hanging over us anymore."
"There is just not a whole lot of stuff going on out there in the market," Thompson says. "I don't see 2012 being the breakout year either. …I can just see a lot of people continuing to sit on their hands."
Any carryover into the early part of 2012 will peter out as bankers settle in for another year of low rates and tepid demand for loans and services, he says.
Fire-sale prices are at the top of the list of reasons to stay on the sidelines if you are a seller.
The prices paid in December's deals were low, even in Texas, where a relatively robust employment and banking market did little to force buyers to pay up, according to data Sheshunoff & Co., an Austin investment bank.
The median price paid in December equaled 90% of the selling banks' tangible book value, according to Sheshunoff. That compares with a median premium paid of 118% tangible book in December 2010 and down from the 200% to 300% of tangible book sellers in decent shape could expect before the economy collapsed.
In at least five deals where prices were publicly announced, the sellers fetched a discount to tangible book.
The bargain of the month: the
The currency buyers rely on to pay for other banks — their shares — has been deeply diminished by investors worried that banks cannot make money until employment picks up and housing prices stabilize, among other thing. As a rule, only the most desperate of sellers come to the table in a buyer's market.
A lot of December deals involved takeovers of institutions caught in unique jams. That created bargain opportunities.
Highlands Bancshares Inc. of Dallas wanted better liquidity and returns for shareholders. ViewPoint Financial Group Inc. needed a new chief executive.
